Stability improving among Impala workforce

Along with most of SA's other platinum producers‚ Implats' operations in Rustenburg have been shaken in the past two years by inter-union rivalry.

The Association of Mineworkers and Construction Union (Amcu) is now the recognised union at Impala Rustenburg. Goodlace said the first meeting had been held on wage negotiations and Amcu's demands for wage increases at Implats are similar to its demands to other gold and platinum producers.

But the group faces another major challenge at this operation‚ which is its biggest‚ namely moving thousands of workers over the next five years from the older shafts‚ which are reaching the end of their lives‚ to the three new shafts: 16‚ 17 and 20. This requires re-skilling because there will be more mining teams. Implats has also redoubled efforts to improve safety‚ which has affected costs and output.

In the past year lower output from the aging Impala Rustenburg operations‚ which are having to manage limited face availability and challenging geology‚ pushed up group unit costs to R16‚570 a platinum ounce. Implats' costs were also swelled by mining inflation of 13% and costs at the Zimbabwean operations‚ Zimplats and Mimosa‚ where it is in joint venture with Aquarius Platinum.

Production

Implats' production‚ excluding treatment of third-party material‚ dropped 2% to 1.2m ounces of refined platinum largely because of a 5% fall in output from Impala Rustenburg to 709‚000oz. Headline earnings more than halved to 330c, down from 685c‚ including impairments of R1.3bn. The dividend for the year was 95c a share compared with 195c last year.

Stanlib platinum analyst Kobus Nell said the increase in costs at Rustenburg was not a surprise as management had flagged it earlier and it was already evident at the interim stage. But the 23% rise in unit costs this year comes after a 19% increase in costs last year‚ which is substantial.

Nell said the Implats results showed how tough the operating environment was for platinum miners‚ but some of these were once-off costs. The new shafts would provide better grades of platinum, improve productivity and he believed the company was slowly turning the corner and moving towards single-digit increases in costs.

Kagiso Asset Management head of research Abdul Davids said Implats was addressing issues at Rustenburg.

"Implats' outlook for flat volumes in 2014 does mean that there will not be a dramatic improvement in cost performance this year‚ but we are confident that it will improve gradually‚" he said.

In the past year Implats' capital spending fell 22% to R6.4bn as management focused on cash preservation and critical path activities and it is expected to fall to R5.5bn this financial year. About R3.8bn of this will be spent at Impala Rustenburg and R1.2bn at Zimplats.

In Zimbabwe‚ Implats has submitted proposals to the government on achieving 51% indigenous ownership. It will sell 10% to a community trust‚ 10% to an employee trust‚ and 31% to the National Indigenisation and Economic Empowerment Fund. The government wanted to review these proposals and discussions are continuing‚ Goodlace said.

Zimplats has also filed a formal objection to the government's compulsory acquisition of a portion of its lease area and a claim for compensation.

Implats group executive: marketing Derek Engelbrecht said Implats remained positive on the outlook for platinum despite the sell-off in the futures market in the first half of this year. Global vehicle sales are still growing and the introduction of legislation to curb emissions in China‚ will provide a healthy platform for industrial demand‚ while supply from SA will not return to the levels of 2006/7. In palladium‚ there are signs of a growing deficit.

Source: Financial Mail via I-Net Bridge